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GVK Power & Infrastructure---------------------------------------------- Maintain OUTPERFORM
3Q FY11 results: miss on power, roads; airports surprise positively
● 3Q results for GVK disappointed, with revenue 12% below and
consolidated profit 6% below estimates. The key misses were in
power—lower gas availability led to lower PLFs—and roads—
higher-than-expected maintenance costs. Airports surprised
positively, with revenue and margins above estimates.
● We expect the issue of lower gas supply by Reliance Industries to
continue at least over the next couple of quarters and revise down
our full-year numbers for FY11E and FY12E accordingly.
● AERA has recently published an order adopting single till for
major airports in India, except for Delhi and Mumbai. As a result,
we now value GVK’s 29% stake in the Bangalore airport at
Rs3/share vs Rs7.5 earlier and cut target price for GVK to Rs51.
● Other key takeaways were: (1) GVK will do feasibility studies for
the Indonesian airports and decision to proceed will be taken in a
year’s time; (2) of the 1,600MW expansion planned across JP and
Gautami, notice to proceed has been given for 400MW at JP; and
(3) monetisation of MIAL real estate is not expected in the next six
months.
3Q results: power disappoints; airports surprise positively
3Q results for GVK disappointed, with revenue 12% below and
consolidated profit 6% below estimates. The key disappointments
were in the power and road segments. Lower PLFs at the power
plants (JPI: 80%, JPII: 80%, Gautami: 79%) was on account of lower
supply of gas by Reliance Industries as well as lower demand due to
higher PLFs at hydro plants and lower agricultural off-take. We expect
the issue of lower gas supply by Reliance Industries to continue at
least over the next couple of quarters and revise down our full-year
numbers for FY11E and FY12E accordingly. The miss in road profit
was mainly on account of higher-than-expected maintenance costs.
Airports surprised positively, with revenue and margins above our
estimates.
Adoption of single till by AERA negative for Bangalore
airport
AERA has recently published an order adopting single till for major
airports in India, except for Delhi and Mumbai. This is expected to
impact profitability for GVK’s Bangalore airport and impact valuations.
GVK plans to appeal against the decision, but we now factor single till
as the base case. Accordingly we value GVK’s 29% stake in the
Bangalore airport at Rs3/share versus Rs7.5 earlier.
Key takeaways from conference call
● GVK has signed MoUs to do feasibility studies for two greenfield
airports in Indonesia and will take a decision on whether to
proceed in a year’s time based on the results of these reports
● Notice to proceed has been given only to 400MW capacity at JPIII.
It is pending for another 400MW at JPIII and 800MW at Gautami.
● Management now expects the first phase of monetization for MIAL
real estate in 2Q FY12. Approval from MMRDA is work-inprogress.
● Of the Rs15 bn raised from PE, GVK has received Rs9.4 bn and
will get the balance Rs5.6 bn over the next year based on
requirement.
India Equity Research Reports, IPO and Stock News Visit http://indiaer.blogspot.com/ for complete details �� ��
GVK Power & Infrastructure---------------------------------------------- Maintain OUTPERFORM
3Q FY11 results: miss on power, roads; airports surprise positively
● 3Q results for GVK disappointed, with revenue 12% below and
consolidated profit 6% below estimates. The key misses were in
power—lower gas availability led to lower PLFs—and roads—
higher-than-expected maintenance costs. Airports surprised
positively, with revenue and margins above estimates.
● We expect the issue of lower gas supply by Reliance Industries to
continue at least over the next couple of quarters and revise down
our full-year numbers for FY11E and FY12E accordingly.
● AERA has recently published an order adopting single till for
major airports in India, except for Delhi and Mumbai. As a result,
we now value GVK’s 29% stake in the Bangalore airport at
Rs3/share vs Rs7.5 earlier and cut target price for GVK to Rs51.
● Other key takeaways were: (1) GVK will do feasibility studies for
the Indonesian airports and decision to proceed will be taken in a
year’s time; (2) of the 1,600MW expansion planned across JP and
Gautami, notice to proceed has been given for 400MW at JP; and
(3) monetisation of MIAL real estate is not expected in the next six
months.
3Q results: power disappoints; airports surprise positively
3Q results for GVK disappointed, with revenue 12% below and
consolidated profit 6% below estimates. The key disappointments
were in the power and road segments. Lower PLFs at the power
plants (JPI: 80%, JPII: 80%, Gautami: 79%) was on account of lower
supply of gas by Reliance Industries as well as lower demand due to
higher PLFs at hydro plants and lower agricultural off-take. We expect
the issue of lower gas supply by Reliance Industries to continue at
least over the next couple of quarters and revise down our full-year
numbers for FY11E and FY12E accordingly. The miss in road profit
was mainly on account of higher-than-expected maintenance costs.
Airports surprised positively, with revenue and margins above our
estimates.
Adoption of single till by AERA negative for Bangalore
airport
AERA has recently published an order adopting single till for major
airports in India, except for Delhi and Mumbai. This is expected to
impact profitability for GVK’s Bangalore airport and impact valuations.
GVK plans to appeal against the decision, but we now factor single till
as the base case. Accordingly we value GVK’s 29% stake in the
Bangalore airport at Rs3/share versus Rs7.5 earlier.
Key takeaways from conference call
● GVK has signed MoUs to do feasibility studies for two greenfield
airports in Indonesia and will take a decision on whether to
proceed in a year’s time based on the results of these reports
● Notice to proceed has been given only to 400MW capacity at JPIII.
It is pending for another 400MW at JPIII and 800MW at Gautami.
● Management now expects the first phase of monetization for MIAL
real estate in 2Q FY12. Approval from MMRDA is work-inprogress.
● Of the Rs15 bn raised from PE, GVK has received Rs9.4 bn and
will get the balance Rs5.6 bn over the next year based on
requirement.
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